EQUITY RESEARCH - COMPANY REPORT 20 JANUARY 2021 · 2 days ago · KIATNAKIN BANK KKP TB BUY UNCHANGED Working on a well-executed plan ผลประกอบการ 4Q20: ิการดาเนนงานปกติอย่ใูนระดับดี

Yuvanart Suwanumphai [email protected]

+66 2611 3554

PREPARED BY FSS INTERNATIONAL INVESTMENT ADVISORY SECURITIES CO LTD (FSSIA). ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT THE END OF THIS REPORT

EQUITY RESEARCH - COMPANY REPORT

20 JANUARY 2021 THAILAND / BANKS

KIATNAKIN BANK KKP TB

BUY UNCHANGED

Working on a well-executed plan

ผลประกอบการ 4Q20: การด าเนนงานปกตอยในระดบด KKP รายงานก าไรสทธ 4Q20 ท 1.11พน ลบ. (-34% y-y, -18% q-q) เปนไปตามคาด บรษทฯ มผลการด าเนนงานปกตในระดบดเยยม โดยก าไรจากการด าเนนงานกอนหกส ารอง (PPOP) เพม 51% y-y, 28% q-q จาก 1) ปรมาณสนเชอเพม 4.5% q-q หลงการเพมของสนเขอบรรษทและเชาซอ; 2) รายไดดอกเบยสงขนจากการแกปญหาหนดอยคณภาพ; และ 3) รายไดทไมใชดอกเบยสทธทสงขนจากรายไดคาธรรมเนยมทดประกอบกบก าไรจากการลงทนทเพมขน อยางไรกด KKP ใชก าไรดงกลาวเพอจดสรรเปนผลขาดทนทางเครดตทคาดวาจะเกดขน (ECL) พเศษเพอรองรบความเสยงจาก COVID-19

ส ารองหนไมกอใหเกดรายไดในระดบสง ในป 2020 KKP มอตราหนไมกอใหเกดรายไดอยท 2.9% ซงดข นกวา 4.0% ในป 2019 อยมากจากโครงการบรรเทาหนของธนาคารฯ และการควบคมคณภาพสนทรพยทมประสทธภาพ ผลขาดทนจากการขายรถยดอยทเพยง 1.3พน ลบ. เทยบกบ 1.4พน ลบ. ในป 2019 จากการยดรถทนอยลงในชวงโครงการบรรเทาหน เราคาดวาหนไมกอใหเกดรายไดและผลขาดทนจากการขายรถยดจะพงขนในป 2021 เปน 3.7% และ 1.9พน ลบ. ตามล าดบ อยางไรกด KKP ไดจดสรรส ารองพเศษเพอปองกนความเสยงดงกลาว ซงท าใหอตราสวนส ารองหนสงสยจะสญตอสนเชอดอยคณภาพเพมเปน 171% และท าใหเราเชอวาบรษทฯ อาจจดสรรส ารองลดลงไดในป 2021

สนเชอและคาธรรมเนยมทโตดมผลมากกวาผลขาดทนจากการขายรถยด เราคาดวา KKP จะรายงานอตราการเตบโตของก าไรสทธทดในป 2021 ท 18% y-y โดยไดแรงหนนจากสนเชอทโตดตอเนองถง 5% y-y จากกลยทธใหมในการหาลกคาสนเชอเชาซอทม ความเสยงต า นอกจากนเรายงคาดอกวารายไดคาธรรมเนยมของ KKP จะดขนจากดลในธรกจวาณชธนกจ ประกอบกบการเพมของคาธรรมเนยมในการซอขายหลกทรพย เราเหนวารายไดคาธรรมเนยมอาจเปนปจจยบวกส าคญส าหรบการเตบโตของก าไร เนองจาก Phatra Capital มสวนแบงรายไดคาธรรมเนยมการซอขายหลกทรพยทสม าเสมอและอยในระดบสง รวมถงมชอเสยงเปนทยอมรบในดานวาณชธนกจ การเตบโตของรายไดทดอาจชวยชดเชยผลขาดทนทเพมขนจากการขายรถยดเมอลกคาออกจากโครงการบรรเทาหน

ผประกอบกจการสนเชอเชาซอรถยนตทเราชอบมากทสดในระยะสน เราปรบเพมราคาเปาหมายของเราเปน 68 บาท (GGM) เพอสะทอนการปรบประมาณการก าไรสทธของเราในป 2021-22 ขน 6.4%/6.8% ตามล าดบ เราคงเลอก KKP เปนหนเดนของเราในกลมผประกอบการสนเชอเชาซอรถยนตในระยะสนโดยมเหตผลจาก 1) ผลตอบแทนในรปเงนปนผลในป 2020 ทคาดวาจะสงทสดในกลม; และ 2) ผลประกอบการหลกทดของบรษทฯ ทงในดานการเตบโตของสนเชอและรายไดคาธรรมเนยม

TARGET PRICE THB68.00

CLOSE THB55.75

UP/DOWNSIDE +22.0%

PRIOR TP THB60.00

CHANGE IN TP +13.3%

TP vs CONSENSUS +18.3%

KEY STOCK DATA

YE Dec (THB m) 2020 2021E 2022E 2023E

Operating profit 6,487 7,543 8,507 9,626

Net profit 5,123 6,033 6,804 7,699

EPS (THB) 6.05 7.13 8.04 9.09

vs Consensus (%) - 13.2 18.9 -

Core net profit 5,123 6,033 6,804 7,699

Core EPS (THB) 6.05 7.13 8.04 9.09

Chg. In EPS est. (%) - 6.4 6.8 -

EPS growth (%) (14.4) 17.8 12.8 13.2

Core P/E (x) 9.2 7.8 6.9 6.1

Dividend yield (%) 5.0 6.7 7.6 8.1

Price/book (x) 1.0 1.0 0.9 0.8

ROE (%) 11.3 12.6 13.5 14.2

ROA (%) 1.5 1.6 1.8 2.0

Share price performance 1 Month 3 Month 12 Month

Absolute (%) 9.9 55.9 (17.4)

Relative to country (%) 7.0 23.8 (13.2)

Mkt cap (USD m) 1,572

3m avg. daily turnover (USD m) 13.1

Free float (%) 80

Major shareholder Wattanavekin family (6%)

12m high/low (THB) 70.50/32.00

Issued shares (m) 847

Sources: Bloomberg consensus; FSSIA estimates

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ม.ค.-20 ม.ค.-20 พ.ค.-20 ก.ค.-20 ก.ย.-20 พ.ย.-20

(%) (THB) KKP Relative to SET

Jan-20 Apr-20 Jul-20 Oct-20 Jan-21

บทวเคราะหฉบบนแปลมาจากบทวเคราะหของ FSSIA ฉบบวนท 20 มกราคม 2021

Kiatnakin Bank KKP TB Yuvanart Suwanumphai

2 FINANSIA

Investment thesis

KKP is a modest commercial banking operation whose

main portfolio includes hire purchase lending. The bank

commands a medium-sized c4% market share in auto

hire purchase lending. Moreover, KKP has its solid

investment banking arm, Phatra Securities PLC

(PHATRA, not listed), under Phatra Capital (100% owned

by KKP). PHATRA is prominent in investment banking

(IB), financial advisory (FA), institutional securities

brokerage, and the growing private banking business. In

our opinion, KKP’s dominant position in institutional

brokerage, as well as its IB and FA businesses, can

potentially help it to generate more sustainable

performance compared with its peers in the current low

interest rate environment.

Company profile

KKP was created through the merger of a commercial banking business driven by Kiatnakin Bank and a capital market business led by Phatra Capital and Phatra Securities. KKP’s banking operations are mostly geared toward retail, with auto hire purchase loans accounting for 44% of its loan portfolio at end-2019.

kiatnakin.co.th

Principal activities (revenue, 2020)

Source: Kiatnakin Bank

Major shareholders

Source: Kiatnakin Bank

Net interest income - 69.1 %

Non-interest income - 30.9 %

Wattanavekin family - 5.7 %

Eastern Sugar and Cane - 4.1 %

Ramkamhang hospital - 4.1 %

Others - 86.1 %

Catalyst

Potential share price catalysts for KKP include:

A higher dividend payout;

Higher fee income, especially from Phatra;

An increase in revenues related to the equity market.

Risk to our call

Downside risks to our GGM-based target price include

weakening asset quality and lower fee income.

Event calendar

Date Event

15 Feb 2021 GDP 4Q20/2020 announcement

April 2021 1Q21 results announcement

Key assumptions

2021E 2022E 2023E

(%) (%) (%)

Net profit (THB m) 6,033 6,804 7,699

Net profit growth 17.8 12.8 13.2

NIM 4.60 4.51 4.60

Loan growth 5.0 5.0 5.0

Fee growth 7.1 2.0 2.0

Non-NII growth* 5.6 3.3 2.7

Credit cost (bp) 135 115 100

Cost to income* 49.7 48.6 47.2

*Including share of profits from associates

Source: FSSIA estimates

Earnings sensitivity

--------------- 2021E ---------------

Loan growth ±2ppt 3.00 5.00 7.00

% change in net profit (1.7) - 1.7

NIM (%) ±5bp 4.55 4.60 4.65

% change in net profit (2.5) - 2.5

Credit cost (bp) ±10bp 130 140 150

% change in net profit 1.7 - (1.7)



3 FINANSIA


4 FINANSIA

4Q20 results: strong core operations and an NPL cushion

KKP reported a 4Q20 net profit of THB1,108m (-34% y-y, -18% q-q) – in line with our

expectation. It had very strong core operations, with a 51% y-y, 28% q-q increase in its

pre-operating profit (PPOP), driven by 1) a 4.5% q-q loan volume increase due to a

rise in its hire purchase and corporate loans; 2) higher interest income from resolving

distressed assets; and 3) higher Non-NII thanks to stronger fee income coupled with

an increase in gains from investments. However, KKP utilised this to set aside extra

expected credit losses (ECL) to cushion against risks from the COVID-19 resurgence,

resulting in a surge in its 4Q20 non-performing loan (NPL) coverage ratio to 171%

from 153% in 3Q20.

4Q20 key highlights

The total loan volume increased 4.5% q-q from a rise in the hire purchase and

corporate segments. KKP increased its new car lending penetration rate for the

first eleven months of 2020 to 4.3% from 2.2% at the end of 2019, due mainly to

its expansion into new business segments with higher asset quality;

Losses from repossessed car sales were THB212m, still below its potential level

due to the slower car repossession activities during the financial relief program;

Although NPLs minimally increased by 3% q-q, KKP still set aside provisions

prudently, with management overlay of THB932m vs its total provisions for this

quarter at THB2,077m;

In 4Q20, the outstanding loans in KKP’s debt relief program comprised 11% of its

total loans vs 34% in 3Q20. All retail customers have exited the debt relief

program, and more than 75% were able to resume their debt repayments

normally. All of the 11% remaining in the program are SME clients, which should

exit the program in 2021.

2020 net profit fell by 14% to THB5.1b. It had strong core operations, with an increase

of 18% in its 2020 PPOP, driven by solid loan growth. However, KKP substantially

increased its ECL setup, owing to a greater deterioration of asset quality due to

COVID-19.

Exhibit 1: KKP – 4Q20/2020 results summary

Year end Dec 31 4Q19 3Q20 4Q20 ------- Change ------- 2019 2020 Change Comments

(THB m) (THB m) (THB m) (y-y %) (q-q %) (THB m) (THB m) (y-y %)

Net interest income 3,118 3,530 3,999 28 13 12,316 14,679 19 Increased y-y, q-q due to a rise in loan volume and distressed asset collection

Non-interest income 1,892 1,283 1,979 5 54 6,852 6,554 (4) Increased from gains on investments Operating income 5,010 4,813 5,978 19 24 19,168 21,233 11

Operating expenses 2,732 2,130 2,545 (7) 19 10,194 10,652 4

PPOP before tax 2,278 2,682 3,433 51 28 8,974 10,581 18

Provision 208 1,017 2,077 898 104 1,676 4,095 144 MO at THB932m

Income tax 391 310 235 (40) (24) 1,307 1,344 3

Minority interest (1) 8 10

1 20

Normalised profit 1,679 1,347 1,108 (34) (18) 5,988 5,123 (14)

Extraordinary items 0 0 0

0 0

Net profit 1,679 1,347 1,108 (34) (18) 5,988 5,123 (14)

EPS (THB) 1.98 1.59 1.31 (34) (18) 7 6 (14)

Asset quality ratio (%) (%) (%) (ppt) (ppt) (%) (%) (ppt)

Gross NPLs (THB m) excl. POCI** 9,560 7,518 7,751 (19) 3 9,560 7,751 (18.9)

NPL ratios excl. POCI 4.00 2.90 2.90 4.00 3

LLR/NPLs excl. POCI 111 153 171 111 171

Credit cost (bp) 35 162 319 72 163

Profitability ratio (%) (%) (%) (%) (%)

Cost to income ratio 54.5 44.3 42.6 53.2 50.2

Average yield 6.3 5.6 6.2 6.3 6.4

Cost of funds 2.3 1.6 1.5 2.3 1.8

Net interest margin (NIM) 4.3 4.2 4.8 4.3 4.8

Non-interest income / total income 37.8 26.7 33.1 35.7 30.9

Liquidity ratio (%) (%) (%)

(%) (%)

Loan to deposit ratio 137.7 105.3 106.0

137.7 106.0

Loan growth (%) (%) (%)

(%) (%)

Year-to-date 4.1 7.5 12.4

y-y 4.1 7.3 12.4

4.1 12.4

q-q (0.2) 2.9 4.5


5 FINANSIA

*Including share of profits from associates; **POCI = Purchased or originated credit-impaired financial assets; Sources: KKP; FSSIA estimates

Robust NPL cushion

KKP’s 2020 NPL ratio was 2.9%, much better than 4.0% in 2019, due to its debt relief

program and efficient asset quality control. Its losses from repossessed car sales only

amounted to THB1.3b vs THB1.4b in 2019, due to slower car repossession activities

during the financial relief program. We project its NPLs and losses from car sales to

spike in 2021 to 3.7% and THB1.9b, respectively. However, as KKP has preventively

set aside extra provisions – with management overlay totalling THB2.5b in 2020 and a

surge in its NPL coverage ratio to 171% from 153% in 3Q20 – we believe it could

enjoy a lower provisioning setup in 2021.

Exhibit 2: NPL ratio* vs Coverage ratio* Exhibit 3: Losses from repossessed cars could spike in 2021

*Excluding POCI; Sources: KKP; FSSIA estimates

Sources: KKP; FSSIA estimates

Strong loan growth and fees outweigh losses from car sales

We expect KKP to deliver solid 2021 net profit growth at 18% y-y, supported by

continued strong loan growth at 5% y-y due to its new strategy of acquiring lower risk-

profile hire purchase customers. Moreover, we expect KKP’s fee income to be

stronger, driven by major investment banking deals, coupled with a rise in its

brokerage fee. To us, fee income could be a key catalyst for its bottom-line growth.

This is because Phatra Capital has a strong and stable securities brokerage revenue

share and a solid investment banking franchise. The solid top-line growth could offset

the spike in losses from repossessed car sales as customers exit debt relief programs.

Exhibit 4: KKP could deliver better loan growth vs its peers Exhibit 5: Net profit growth



4.0

2.9

3.7 3.7 3.6 111

171 166

158 154

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140

160

180

2.0

2.5

3.0

3.5

4.0

4.5

2019 2020 2021E 2022E 2023E

(%)(%)NPL ratio Coverage ratio (RHS)

1,423 1,309 1,900 1,600 1,400

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2019 2020 2021E 2022E 2023E

(%)(THB m)Loss from repossessed cars Change y-y (RHS)

18.6

4.1

12.4

5.0 5.0 5.0 5.1

8.8 7.3

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2018 2019 2020 2021E 2022E 2023E

(%)KKP change y-y Sector change y-y

5,988 5,123 6,033 6,804 7,699

(14.4)

17.8

12.8 13.2

(20)

(15)

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10

15

20

0

2,000

4,000

6,000

8,000

10,000

2019 2020 2021E 2022E 2023E

(%)(THB m)Net profit Change y-y (RHS)


6 FINANSIA

Net profit and TP revisions

We revise up our net profit forecasts for 2021-22 by 6.4%/6.8% to reflect our higher

loan growth, yield on earnings assets, and lower OPEX assumptions, as detailed

below:

1) We increase our 2021 loan growth assumption to 5.0% vs our previous assumption

of 3.0% due to the better-than-expected hire purchase loan volume due to its new

strategy of acquiring lower risk-profile hire purchase customers.

2) We increase our 2021-22 NIM assumptions to 4.6%/4.5% vs our previous

assumptions of 4.3%/4.4% due to the increase in high yield loans and better-than-

expected cost of fund management.

3) Due to the better-than-expected cost control, we lower our 2021-22 operating

expense assumptions by 7.0%/5.5%.

Exhibit 6: Key changes in assumptions

2020 --------------------------- 2021E ------------------------- --------------------------- 2022E ------------------------ 2023E

Actual Old New Change Old New Change New

(THB m) (THB m) (THB m) (%) (THB m) (THB m) (%) (THB m)

Net interest income 14,679 15,063 15,386 2.1 15,750 15,800 0.3 16,582

Non-interest income 6,554 7,256 6,923 (4.6) 7,188 7,154 (0.5) 7,349

Operating income 21,233 22,319 22,309 0.0 22,939 22,954 0.1 23,931

Operating expenses 10,652 11,911 11,077 (7.0) 11,801 11,148 (5.5) 11,293

PPOP before tax 10,581 10,408 11,232 7.9 11,138 11,806 6.0 12,638

Provision (Reversal) 4,095 3,379 3,688 9.1 3,245 3,299 1.7 3,012

Taxes expenses 1,344 1,357 1,509 11.2 1,523 1,701 11.7 1,925

Minority interest 20 1 1 6.4 1 1 6.8 2

Normalized profit 5,123 5,671 6,033 6.4 6,369 6,804 6.8 7,699

Extraordinary items - - -

- -

-

Net profit 5,123 5,671 6,033 6.4 6,369 6,804 6.8 7,699

EPS (THB) 6.05 6.70 7.13 6.4 7.52 8.04 6.8 9.09

Key statistic and ratio (%) (%) (%) (%) (%) (%) (%) (%)

Asset quality ratio

Gross NPLs (THB m) 8,456 11,472 10,147 (11.5) 11,357 10,655 (6.2) 10,974

Gross NPLs / Loans 2.92 4.31 3.66

4.07 3.66

3.59

Loan loss reserve/NPLs 139 114 135

129 143

150

Credit cost (bp) 163 130 135

120 115

100

Profitability ratio

Cost to income ratio 50.2 53.4 49.7

51.4 48.6

47.2

Average yield (%) 6.4 5.7 6.0

6.0 6.1

6.2

Cost of fund (%) 1.8 1.7 1.6

2.0 1.9

1.9

Net interest margin (NIM) 4.79 4.26 4.60

4.35 4.51

4.60

Liquidity ratio

Loan to deposit ratio 106.0 99.4 112.6

103.3 117.0

121.1

Capital adequacy ratio

CAR 17.4 16.1 17.2

16.0 17.3

17.6

% growth

Loan growth (y-y) 12.4 3.0 5.0

5.0 5.0

5.0


We revise up our GGM-based TP to THB68 from THB60, as we 1) increase our EPS

forecast, leading to a higher book value; and 2) revise up our target 2021E P/BV from

1.1x to 1.2x to reflect the increase in our average long-term ROE target of 13.4% from

12.5%.


7 FINANSIA

Exhibit 7: GGM-derived target price

Target price (THB) 68.0 from 60.0

Recommendation BUY

Risk-free rate (%) 3.0 (unchanged)

Market risk premium (%) 8.0 (unchanged)

Cost to equity (%) 12.1 (unchanged)

Terminal growth (%) 4.6 (from 4.0)

ROE target (%) 13.4 (from 12.5)

Risk to TP Downside risks to our GGM-based target price include weakening asset quality and lower fee income.


Exhibit 8: KKP – prospective P/BV band Exhibit 9: KKP – prospective P/E band

Sources: Bloomberg; FSSIA estimates

Sources: Bloomberg; FSSIA estimates

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

201

2019

2020

2021

KKP PBV (x)

std +2 = 1.8x (THB104)

std +1 = 1.5x (THB86)

3Y-avg = 1.2x (THB69)

std -1 = 0.9x (THB52)

std -2 = 0.6x (THB35)

4

6

8

10

12

14

201

2019

2020

2021

KKP PER (x)

std +2 = 13x (THB87)

std +1 = 11.2x (THB75)

5Y-avg = 9.4x (THB63)

std -1 = 7.5x (THB50)

std -2 = 5.7x (THB38)


8 FINANSIA

Financial Statements Kiatnakin Bank

Profit and Loss (THB m) Year Ending Dec 2019 2020 2021E 2022E 2023E

Interest Income 18,036 19,584 20,046 21,284 22,292

Interest expense (5,720) (4,905) (4,660) (5,484) (5,709)

Net interest income 12,316 14,679 15,386 15,800 16,582

Net fees & commission 4,604 4,336 4,645 4,738 4,833

Foreign exchange trading income 277 1,079 1,025 1,076 1,130

Securities trading income 568 50 55 60 66

Dividend income 576 389 428 471 471

Other income 827 700 770 809 849

Non interest income 6,852 6,554 6,923 7,154 7,349

Total income 19,168 21,233 22,309 22,954 23,931

Staff costs (5,577) (5,664) (5,893) (6,128) (6,373)

Other operating costs (4,617) (4,988) (5,185) (5,020) (4,919)

Operating costs (10,194) (10,652) (11,077) (11,148) (11,293)

Pre provision operating profit 8,974 10,581 11,232 11,806 12,638

Provision for bad and doubtful debt (1,676) (4,095) (3,688) (3,299) (3,012)

Other provisions - - - - -

Operating profit 7,297 6,487 7,543 8,507 9,626

Recurring non operating income 0 0 0 0 0

Associates 0 0 0 0 0

Goodwill amortization - - - - -

Non recurring items 0 0 0 0 0

Profit before tax 7,297 6,487 7,543 8,507 9,626

Tax (1,307) (1,344) (1,509) (1,701) (1,925)

Profit after tax 5,990 5,143 6,035 6,806 7,701

Minority interests (1) (20) (1) (1) (2)

Preferred dividends - - - - -

Other items - - - - -

Reported net profit 5,988 5,123 6,033 6,804 7,699

Non recurring items & goodwill (net) - - 0 0 0

Recurring net profit 5,988 5,123 6,033 6,804 7,699

Per share (THB)

Recurring EPS * 7.07 6.05 7.13 8.04 9.09

Reported EPS 7.07 6.05 7.13 8.04 9.09

DPS 5.00 2.80 3.75 4.25 4.50

Growth

Net interest income (%) 9.4 19.2 4.8 2.7 4.9

Non interest income (%) 0.2 (4.3) 5.6 3.3 2.7

Pre provision operating profit (%) 3.9 17.9 6.1 5.1 7.0

Operating profit (%) (1.2) (11.1) 16.3 12.8 13.2

Reported net profit (%) (0.9) (14.4) 17.8 12.8 13.2

Recurring EPS (%) (0.9) (14.4) 17.8 12.8 13.2

Reported EPS (%) (0.9) (14.4) 17.8 12.8 13.2

Income Breakdown

Net interest income (%) 64.3 69.1 69.0 68.8 69.3

Net fees & commission (%) 24.0 20.4 20.8 20.6 20.2

Foreign exchange trading income (%) 1.4 5.1 4.6 4.7 4.7

Securities trading income (%) 3.0 0.2 0.2 0.3 0.3

Dividend income (%) 3.0 1.8 1.9 2.1 2.0

Other income (%) 4.3 3.3 3.5 3.5 3.5

Operating performance

Gross interest yield (%) 6.28 6.40 5.99 6.08 6.18

Cost of funds (%) 2.34 1.83 1.60 1.86 1.91

Net interest spread (%) 3.94 4.57 4.39 4.22 4.27

Net interest margin (%) 4.3 4.8 4.6 4.5 4.6

Cost/income(%) 53.2 50.2 49.7 48.6 47.2

Cost/assets(%) 3.3 3.2 3.0 3.0 3.0

Effective tax rate (%) 17.9 20.7 20.0 20.0 20.0

Dividend payout on recurring profit (%) 70.7 46.3 52.6 52.9 49.5

ROE (%) 13.9 11.3 12.6 13.5 14.2

ROE - COE (%) 3.1 0.5 1.8 2.7 3.4

ROA (%) 1.9 1.5 1.6 1.8 2.0

RORWA (%) 2.3 1.9 2.1 2.2 2.4

* Pre-exceptional, pre-goodwill and fully diluted

Sources: Kiatnakin Bank; FSSIA estimates


9 FINANSIA

Financial Statements Kiatnakin Bank

Balance Sheet (THB m) Year Ending Dec 2019 2020 2021E 2022E 2023E

Gross customer loans 237,139 266,544 279,871 293,865 308,558

Total provisions (10,589) (11,725) (13,734) (15,270) (16,431)

interest in suspense 1,128 0 784 823 864

Net customer loans 227,677 258,846 266,921 279,418 292,991

Bank loans 11,982 32,771 29,517 24,688 19,425

Government securities - - - - -

Trading securities - - - - -

Investment securities 39,201 34,603 35,750 36,940 38,175

Cash & equivalents 1,110 1,491 1,398 2,621 1,235

Other interesting assets - - - - -

Tangible fixed assets 6,624 6,451 6,173 5,937 5,737

Associates - - - - -

Goodwill - - - - -

Other intangible assets - - - - -

Other assets 25,096 29,250 29,740 26,314 26,913

Total assets 311,690 363,411 369,499 375,917 384,476

Customer deposits 172,174 251,526 248,632 251,118 254,885

Bank deposits - - - - -

Other interest bearing liabilities 73,132 39,184 44,992 45,450 46,139

Non interest bearing liabilities 22,373 26,076 26,858 27,126 27,126

Hybrid Capital - - - - -

Total liabilities 267,679 316,785 320,482 323,695 328,150

Share capital 8,468 8,468 8,468 8,468 8,468

Reserves 35,435 38,050 40,435 43,634 47,727

Total equity 43,902 46,517 48,903 52,101 56,195

Minority interests 109 109 114 122 131

Total liabilities & equity 311,690 363,411 369,499 375,917 384,476

Supplementary items

Risk weighted assets (RWA) 267,295 285,745 300,032 315,034 330,785

Average interest earning assets 287,099 306,198 334,606 350,315 360,825

Average interest bearing liabilities 244,834 267,916 291,979 294,898 298,588

Tier 1 capital 36,377 38,241 40,178 42,999 46,652

Total capital 45,975 49,691 51,628 54,449 58,102

Gross non performing loans (NPL) 9,560 8,456 10,147 10,655 10,974

Per share (THB)

Book value per share 51.85 54.94 57.75 61.53 66.36

Tangible book value per share 51.85 54.94 57.75 61.53 66.36

Growth

Gross customer loans 4.1 12.4 5.0 5.0 5.0

Average interest earning assets 9.7 6.7 9.3 4.7 3.0

Total asset (%) 1.8 16.6 1.7 1.7 2.3

Risk weighted assets (%) 3.5 6.9 5.0 5.0 5.0

Customer deposits (%) (5.2) 46.1 (1.2) 1.0 1.5

Leverage & capital measures

Customer loan/deposits (%) 132.2 102.9 107.4 111.3 115.0

Equity/assets (%) 14.1 12.8 13.2 13.9 14.6

Tangible equity/assets (%) 14.1 12.8 13.2 13.9 14.6

RWA/assets (%) 85.8 78.6 81.2 83.8 86.0

Tier 1 CAR (%) 13.6 13.4 13.4 13.6 14.1

Total CAR (%) 17.2 17.4 17.2 17.3 17.6

Asset Quality

Change in NPL (%) 1.7 (11.5) 20.0 5.0 3.0

NPL/gross loans (%) 4.0 3.2 3.6 3.6 3.6

Total provisions/gross loans (%) 4.5 4.4 4.9 4.9 5.3

Total provisions/NPL (%) 110.8 138.7 135.3 143.3 149.7

Valuation 2019 2020 2021E 2022E 2023E

Recurring P/E (x) * 7.9 9.2 7.8 6.9 6.1

Recurring P/E @ target price (x) * 9.6 11.2 9.5 8.5 7.5

Reported P/E (x) 7.9 9.2 7.8 6.9 6.1

Dividend yield (%) 9.0 5.0 6.7 7.6 8.1

Price/book (x) 1.1 1.0 1.0 0.9 0.8

Price/tangible book (x) 1.1 1.0 1.0 0.9 0.8

Price/tangible book @ target price (x) 1.3 1.2 1.2 1.1 1.0

* Pre-exceptional, pre-goodwill and fully diluted

Sources: Kiatnakin Bank; FSSIA estimates


10 FINANSIA

Corporate Governance report of Thai listed companies 2019

EXCELLENT LEVEL

AAV ADVANC AIRA AKP AKR AMA AMATA AMATAV ANAN AOT AP

ARROW BAFS BANPU BAY BCP BCPG BOL BRR BTS BTW BWG

CFRESH CHEWA CHO CK CKP CM CNT COL COMAN CPALL CPF

CPI CPN CSS DELTA DEMCO DRT DTAC DTC EA EASTW ECF

EGCO GBX GC GCAP GEL GFPT GGC GOLD GPSC GRAMMY GUNKUL

HANA HARN HMPRO ICC ICHI III ILINK INTUCH IRPC IVL JKN

JSP K KBANK KCE KKP KSL KTB KTC KTIS LH LHFG

LIT LPN MAKRO MALEE MBK MBKET MC MCOT MFEC MINT MONO*

MTC NCH NCL NKI NSI NVD NYT OISHI OTO PAP PCSGH

PDJ PG PHOL PJW PLANB PLANET PORT PPS PR9 PREB PRG

PRM PSH PSL PTG PTT PTTEP PTTGC PYLON Q-CON QH QTC

RATCH ROBINS** RS S S & J SABINA SAMART SAMTEL SAT SC SCB

SCC SCCC SCN SDC SEAFCO SEAOIL SE-ED SELIC SENA SIS SITHAI

SNC SORKON SPALI SPI SPRC SSSC STA STEC SVI SYNTEC TASCO

TCAP THAI THANA THANI THCOM THIP THREL TIP TISCO TK TKT

TMB TMILL TNDT TOA TOP TRC TRU TRUE TSC TSR TSTH

TTA TTCL TTW TU TVD TVO U UAC UV VGI VIH

WACOAL WAVE WHA WHAUP WICE WINNER

VERY GOOD LEVEL

2S ABM ADB AF AGE AH AHC AIT ALLA ALT AMANAH

AMARIN APCO APCS AQUA ARIP ASAP ASIA ASIAN ASIMAR ASK ASN

ASP ATP30 AUCT AYUD B BA BBL BDMS BEC BEM BFIT

BGC BGRIM BIZ BJC BJCHI BLA BPP BROOK CBG CEN CENTEL

CGH CHG CHOTI CHOW CI CIMBT CNS COLOR COM7 COTTO CRD

CSC CSP DCC DCON DDD DOD EASON ECL EE EPG ERW

ESTAR ETE FLOYD FN FNS FORTH FPI FPT FSMART FSS FVC

GENCO GJS GL GLOBAL GLOW** GULF HPT HTC HYDRO ICN IFS

INET INSURE IRC IRCP IT ITD*** ITEL J JAS* JCK JCKH

JMART JMT JWD KBS KCAR KGI KIAT KOOL KWC KWM L&E

LALIN LANNA LDC LHK LOXLEY LRH LST M MACO MAJOR MBAX

MEGA METCO MFC MK MODERN MOONG MPG MSC MTI NEP NETBAY

NEX NINE NOBLE NOK NTV NWR OCC OGC ORI OSP PATO

PB PDG PDI PL PLAT PM PPP PRECHA PRIN PRINC PSTC

PT QLT RCL RICHY RML RWI S11 SAAM SALEE SAMCO SANKO

SAPPE SAWAD SCG SCI SCP SE SFP SIAM SINGER SIRI SKE

SKR SKY SMIT SMK SMPC SMT SNP SONIC SPA SPC SPCG

SPVI SR SRICHA SSC SSF SST STANLY STPI SUC SUN SUSCO

SUTHA SWC SYMC SYNEX T TACC TAE TAKUNI TBSP TCC TCMC

TEAM TEAMG TFG TFMAMA THG THRE TIPCO TITLE TIW TKN TKS

TM TMC TMD TMI TMT TNITY TNL TNP TNR TOG TPA

TPAC TPBI TPCORP TPOLY TRITN TRT TSE TSTE TVI TVT TWP

TWPC UBIS UEC UMI UOBKH UP UPF UPOIC UT UWC VNT

WIIK XO YUASA ZEN ZMICO

GOOD LEVEL

A ABICO ACAP*** AEC AEONTS AJ ALUCON AMC APURE AS ASEFA

AU B52 BCH BEAUTY BGT BH BIG BLAND BM BR BROCK

BSBM BSM BTNC CCET CCP CGD CHARAN CHAYO CITY CMAN CMC

CMO CMR CPL CPT CSR CTW CWT D DIMET EKH EMC

EPCO ESSO FE FTE GIFT GLAND GLOCON GPI GREEN GTB GYT

HTECH HUMAN IHL INGRS INOX JTS JUBILE KASET KCM KKC KWG

KYE LEE LPH MATCH MATI M-CHAI MCS MDX META MGT MJD

MM MVP NC NDR NER NNCL NPK NUSA OCEAN PAF PF

PICO PIMO PK PLE PMTA POST PPM PROUD PTL RCI RJH

ROJNA RPC RPH SF SGF SGP SKN SLP SMART SOLAR SPG

SQ SSP STI SUPER SVOA TCCC THE THMUI TIC TIGER TNH

TOPP TPCH TPIPP TPLAS TQM TTI TYCN UTP VCOM VIBHA VPO

WIN WORK WP WPH ZIGA

Score Range Number of Logo Description

90-100 Excellent

80-89 Very Good

70-79 Good

60-69 Satisfactory

50-59 Pass

Less than 50 No logo given -

Disclaimer:

The disclosure of the survey results of the Thai Institute of Directors Association (‘IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey results may be changed after that date. FSS International Investment Advisory Company Limited does not confirm nor certify the accuracy of such survey results. * CGR scoring should be considered with news regarding wrong doing of the company or director or executive of the company such unfair practice on securities trading, fraud, and corruption SEC imposed a civil sanction against insider trading of director and executive; ** delisted Source: Thai Institute of Directors Association (IOD); FSSIA’s compilation


11 FINANSIA

Anti-corruption Progress Indicator

CERTIFIED

ADVANC AIE AKP AMANAH AP APCS AQUA ARROW ASK ASP AYUD

BAFS BANPU BAY BBL BCH BCP BCPG BGRIM BJCHI BKI BLA

BROOK BRR BSBM BTS BWG CEN CENTEL CFRESH CGH CHEWA CIG

CIMBT CM COM7 CPALL CPF CPI CPN CSC DCC DEMCO DIMET

DRT DTAC DTC EASTW ECL EGCO FE FNS FSS GBX GC

GCAP GEL GFPT GGC GJS GOLD GPSC GSTEEL GUNKUL HANA HARN

HMPRO HTC ICC IFS INET INSURE INTUCH IRPC IVL K KASET

KBANK KBS KCAR KCE KGI KKP KSL KTB KTC KWC L&E

LANNA LHK LPN LRH M MAKRO MALEE MBAX MBK MBKET MC

MCOT MFC MINT MONO MOONG MSC MTI NBC NINE NKI NMG

NNCL NSI OCC OCEAN OGC PAP PATO PB PCSGH PDG PDI

PDJ PE PG PHOL PL PLANB PLANET PLAT PM PPP PPS

PREB PRG PRINC PSH PSTC PT PTG PTT PTTEP PTTGC PYLON

Q-CON QH QLT QTC RATCH RML S & J SABINA SAT SC SCB

SCC SCCC SCG SCN SE-ED SELIC SENA SGP SIRI SIS SITHAI

SMIT SMK SMPC SNC SNP SORKON SPACK SPC SPI SPRC SRICHA

SSF SSI SSSC SST STA SUSCO SVI SYNTEC TASCO TCAP TFG

TFI TFMAMA THANI THCOM THIP THRE THREL TIP TIPCO TISCO TKT

TMB TMD TMILL TMT TNITY TNL TNP TNR TOG TOP TPA

TPCORP TRU TRUE TSC TSTH TTCL TU TVD TVI TWPC U

UBIS UEC UKEM UOBKH VGI VIH VNT WACOAL WHA WICE WIIK

DECLARED

2S ABICO AF AI AIRA ALT AMA AMARIN AMATA ANAN B

BM BPP BUI CHG CHO CHOTI CHOW CI CMC COL DDD

DELTA EFORL EPCO ESTAR ETE FPI FTE ICHI INOX IRC ITEL

JAS JSP JTS KWG LDC LIT META MFEC MPG NEP NOK

NWR ORI PRM PSL ROJNA RWI SAAM SAPPE SCI SEAOIL SHANG

SKR SPALI STANLY SYNEX TAE TAKUNI TMC TOPP TPP TRITN TVO

UV UWC WHAUP XO YUASA ZEN

Level

Certified This level indicates practical participation with thoroughly examination in relation to the recommended procedures from the audit committee or the SEC’s certified auditor, being a certified member of Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) or already passed examination to ensure independence from external parties.

Declared This level indicates determination to participate in the Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)

Disclaimer: The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of th e Office of the Securities and Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1), Annual Report (Form 56-2), or other relevant documents or reports of such listed company . The assessment result is therefore made from the perspective of Thaipat Institute that is a third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information. Nevertheless, FSS International Investment Advisory Company Limited does not confirm, verify, or certify the accuracy and completeness of the assessment results.

Note: Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of June 24, 2019) are categorised into: 1) companies that have declared their intention to join CAC, and; 2) companies certified by CAC.

Source: The Securities and Exchange Commission, Thailand; * FSSIA’s compilation

https://market.sec.or.th/public/idisc/en/Ranking/Listed/Score


12 FINANSIA

GENERAL DISCLAIMER

ANALYST(S) CERTIFICATION

Yuvanart Suwanumphai FSS International Investment Advisory Securities Co., Ltd

The individual(s) identified above certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to

any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will

be, directly or indirectly, related to the specific recommendations or views expressed herein.

This report has been prepared by FSS International Investment Advisory Company Limited (FSSIA). The information herein has been obtained from

sources believed to be reliable and accurate; however FSS makes no representation as to the accuracy and completeness of such information.

Information and opinions expressed herein are subject to change without notice. FSS has no intention to solicit investors to buy or sell any security in

this report. In addition, FSS does not guarantee returns nor price of the securities described in the report nor accept any liability for any loss or damage

of any kind arising out of the use of such information or opinions in this report. Investors should study this report carefully in making investment

decisions. All rights are reserved.

This report may not be reproduced, distributed or published by any person in any manner for any purpose without permission of FSSIA. Investment in

securities has risks. Investors are advised to consider carefully before making investment decisions.

History of change in investment rating and/or target price

Kiatnakin Bank (KKP TB)

Date Rating Target price Date Rating Target price Date Rating Target price

27-Nov-2018 19-Mar-2019

HOLD HOLD

75.00 78.00

30-Aug-2019 02-Apr-2020

HOLD HOLD

73.00 73.00

16-Jul-2020 03-Dec-2020

BUY BUY

54.00 60.00

Yuvanart Suwanumphai started covering this stock from 16-Jul-2020

Price and TP are in local currency


Company Ticker Price Rating Valuation & Risks

Kiatnakin Bank KKP TB THB 55.75 BUY Downside risks to our GGM-based target price include weakening asset quality and lower fee income.


Additional Disclosures

Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available

in our most recently published reports. You can contact the analyst named on the front of this note or your representative at Finansia Syrus Securities

Public Company Limited

FSSIA may incorporate the recommendations and target prices of companies currently covered by FSS Research into equity research reports, denoted

by an ‘FSS’ before the recommendation. FSS Research is part of Finansia Syrus Securities Public Company Limited, which is the parent company of

FSSIA.

All share prices are as at market close on 19-Jan-2021 unless otherwise stated.

20

30

40

50

60

70

80

90

ม.ค.-1 ม.ค.-1 พ.ค.-1 ก.ค.-1 ก.ย.-1 พ.ย.-1 ม.ค.-19 ม.ค.-19 พ.ค.-19 ก.ค.-19 ก.ย.-19 พ.ย.-19 ม.ค.-20 ม.ค.-20 พ.ค.-20 ก.ค.-20 ก.ย.-20 พ.ย.-20

(THB) Kiatnakin Bank Target Price

Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21


13 FINANSIA

RECOMMENDATION STRUCTURE

Stock ratings

Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price.

BUY (B). The upside is 10% or more.

HOLD (H). The upside or downside is less than 10%.

REDUCE (R). The downside is 10% or more.

Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a

temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.

* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market

will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases,

therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations

Overweight. The analyst expects the fundamental conditions of the sector to be positive over the next 12 months.

Neutral. The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months.

Underweight. The analyst expects the fundamental conditions of the sector to be negative over the next 12 months.

Country (Strategy) Recommendations

Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market

recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to

the market cost of equity.

Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market



Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market



Documents

EQUITY RESEARCH - COMPANY REPORT 20 JANUARY 2021 · 2 days ago · KIATNAKIN BANK KKP TB BUY UNCHANGED Working on a well-executed plan ผลประกอบการ 4Q20: ิการดาเนนงานปกติอย่ใูนระดับดี